Do you live in California and have a State Farm whole life insurance policy? Is it a flexible-premium, adjustable-rate policy bought in 1994 or later? If so, you may be paying too much for it.
The adjustable rates rely partly on an amount called cost of insurance (COI). Owners of California State Farm policies, as well as of other insurance policies, claim that this amount is being improperly figured, with costs added in that are well beyond what’s permitted in their policies.
We’re investigating to see if a class action is needed to stop overcharges to consumers that are not permitted under their policies.
In 2016, the Consumer Federation of America contacted state insurance regulators to ask that they check certain rate increases to see that insurers were figuring these amounts properly. “We request that you review these practices to determine if the insurers are using COI increases to maintain profits…” the letter said, in part.
For most policies, the main source of data for figuring COI should be mortality rates. These vary according to the consumer’s age each year, sex, and class rates. But companies sometimes use other factors to figure the rates—factors which are not permitted under the terms of the policies. The CFA letter said, “CFA believes that you should require UL insurers to justify COI rate schedule increases by demonstrating that current mortality experience … exceeds pricing assumptions when the policies were sold.”
Class actions have already been filed against a number of insurers, including State Farm, Protective Life, and Voya, arguing about the figuring of COI. For example, the Voya case claims that the company considers factors such as expense experience, persistency, taxes, profit assumptions, investment earnings, and capital reserve requirements in figuring COI. In the Protective case, the complaint argues that as mortality rates have improved, COI should have gone down.
In these kinds of policies, most of the premium goes into the Cash Value or savings component of the insurance, and the insurer deducts COI and other things from the Cash Value. If your Cash Value has been going down instead of up, this may indicate a rise in COI.
If you have a California State Farm flexible-premium, adjustable-rate whole life insurance policy that you bought in 1994 or later, we’re interested in what your experience has been. Fill out the form on this page and attorney will review it for free.Article Type: Investigation